Eurotorg’s revenues increased 11% to $2.0bn in 2017, mainly driven by a 9% expansion in retail sales thanks to new store openings amid a moderate 1.1% expansion in like-for-like (LFL) sales, the company said in a statement on May 3.

The LFL average ticket grew 9.3%, while LFL traffic fell 7.5%, which the company attributes to a combination of natural cannibalization and its marketing aimed at inducing customers to buy more goods per visit.

Below the top line, the positive trends seen in the 1H17 numbers spread to the full-year results. The gross margin improved to 26% from 23% in 2016 thanks to changes in supplier terms and growth of high-margin products in the sales mix. This helped boost EBITDA to $191mn (up 46% y/y), for a 9.4% margin, Sberbank CIB reports.

Free cash flow (FCF) was positive but small, totaling $26mn. Dragging on it was the $60mn of investments into working capital the company made to support margin expansion, though capex came in even below the guidance.

“The management confirmed its estimate that capex should be 2.0-2.5% of revenues in the medium term to support capital-light expansion through leased spaces and it does not expect major changes in working capital moving forward,” Sberbank CIB said in a note.

“The decent profitability allowed Eurotorg to lower net debt/EBITDA to 3.2, below its Eurobond incurrence covenant of 3.5. Adjusted for operating leases, net debt/EBITDAR fell to 3.5. After the Eurobond placement in October, liquidity has materially improved and less than $100mn of debt is due before 2021. Yet debt reduction remains a priority for the company, with leverage below 2.0 serving as a mid-term target. One way to reach that could be an IPO," Sberbank CIB adds. "For 2018, the management guides for low double-digit revenue growth, with nearly half of that coming from LFL sales growth amid a bigger selling space expansion than last year. We remain positive on the credit. The Eurotorg 22 is quoted around 101% of par with a YTM of 8.37% (Z-spread 550 bps),” Sberbank CIB says.

Eurotorg (aka Euroopt) is the largest food retailer in Belarus with around a 20% market share. While it has followed the classic development path of other Commonwealth of Independent States (CIS) supermarket chains it has been a pioneer at home in bringing modern business practises to Bealrus.

In January this year the company said it was expanding and will launch an online store for the Russian market. According to board member Andrei Matsiavin, possible investments in the project could reach $50-$80mn. Online operations in Russia already existed in 2015-2016, however Eurotorg was forced to halt them due to depreciation f the Belarusian ruble.

The board of Ukraine’s main donor, the International Monetary Fund (IMF) signed off on the badly needed $3.9bn Stand by agreement (SBA) at a meeting on December 18.

Average bribe in Russia is estimated by the Public Prosecution Service at RUB609,000 ($9,000), while the total amount of uncovered bribes in January-September 2018 stood at RUB1.8bn ($26.7mn), as reported by Vedomosti daily.

Analysts think country is undergoing a much harder landing than many people expected. Credit crunch seen morphing from complete shutdown in FX-denominated lending to suppression of TRY lending.

Russia's e-commerce market in 2018 could reach RUB1.5 trillion ($22.8bn), according to the estimates by Data Insight cited by Vedomosti daily on December 17. Sales in Russian online stores are expected to increase by 19% to RUB1.15 trillion

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